Is Vietnam making progress in the global software outsourcing market? The IT sourcing market has long been seen as a natural fit for Vietnam, but has been a long road to reach the development phase.

In A.T. Kearney’s 2017 Global Services Location Index published last week, Vietnam has entered the Top 10 destinations, at number 6 out of 55 countries, ranking five places higher from the 2016 report. It is interesting to note that Asian countries occupy seven of the ten top places for outsourcing, led by India, China and Malaysia holding the top 3 places.

The A.T. Kearney Survey/Index covers both IT outsourcing and Business Process Outsourcing. The Chicago-based company releases their annual ranking report every September.

The reason given for Vietnam’s jump of five places in the rankings is due to the growing popularity of Business Process Outsourcing which has been growing globally at a rate of 20-25% over the last decade. In addition, an abundance of young people fluent in English, and low cost labor have made Vietnam an increasingly popular destination for Business Process Outsourcing.

Out of the top ten countries, Vietnam is ranked #1 for financial attractiveness but only ranked 8th for people skills and availability, marginally ahead of Thailand and Chile, and ranked number 8 for business environment, slightly ahead of Indonesia and the Philippines.

The report stated that Automation is gaining pace, and is considered to be the main threat to millions of jobs through the world in both developed and developing countries.

According to A.T. Kearney, the fear that automation will destroy jobs is by no means new to developed nations that have seen successive waves of technological improvements displace low-skilled workers. This threat is less familiar, however, to the developing countries that have benefited from the offshoring and outsourcing trends over the past several decades. These lower-cost nations have experienced tremendous increases in high-quality employment and transformational economic growth in recent years, but this development model is now increasingly under pressure.

AT Kearney also cautioned in respect of Vietnam that as Japan is the Vietnamese Business Processing Outsource (BPO) industry’s primary client, continued growth in this area will depend, in part, on the strength of the Japanese economy.